A California law requiring major fast food chains to pay workers a minimum wage of $20 an hour went into effect on April 1. Two months later, how is the law working?
SACRAMENTO, Calif. — Is California’s new $20 minimum wage for fast-food workers causing restaurant closures?
Two months after price increases for major fast food chains went into effect, one chain just announced it would close 44 locations across the state.
Approaching Rubio’s Coastal Grill in El Dorado Hills, you see stacked chairs, empty tables and a sign hanging on the door that reads “This location is closed.”
The Carlsbad-based restaurant chain announced over the weekend that it would close 48 of its more than 100 locations in California, while 86 locations in Nevada, Arizona and California will remain open.
“Unfortunately, I think what we’re seeing right now is the beginning of a trend of restaurant closures,” said Joette Condie, president and CEO of the California Restaurant Association.
He said California’s new laws affect businesses, workers and consumers alike.
AB 1228 increased the minimum wage for employees of major fast-food chains in California from $16 to $20 an hour, effective April 1.
“When your costs skyrocket overnight to $4 an hour per employee, it’s pretty difficult when you’re in an industry where the average profit margin is 3 to 5 percent,” Condie said.
Advocates for a wage increase say it would help California fast-food workers make a living in an expensive state.
“The majority of minimum wage workers are not teenagers,” says Paul Lee, professor emeritus at the University of California, Davis. “They’re in their 20s, 30s, 40s and older adults, many of whom have children.”
ABC10 asked Rubio’s if the $20 minimum wage influenced his decision to close 48 stores in California.
A spokesperson did not respond directly, but said in a statement:
“The decision to close a location is never easy. After a thorough review of our business and the current business environment, Rubio’s Coastal Grill, home of the Original Fish Taco, has decided to close 48 underperforming locations in California, effective May 31, while keeping 86 locations open in California, Arizona and Nevada. The reason for the closures is the rising cost of doing business in California. While closing locations is painful, these store closures are a necessary step in our strategic long-term plan to position Rubio’s for success for many years to come.”
“The number of restaurants closing is staggering,” Condie said.
He said many restaurant owners are now choosing between raising prices for customers, cutting employee hours or a combination of both.
“Because if we don’t we won’t be profitable and we won’t be able to stay in business,” he said.
Some disagree, including Ali Bustamante, vice president of worker power and economic security at the Roosevelt Institute, that workers and customers should feel the impact.
“California businesses can absorb this minimum wage increase without raising prices and without affecting jobs,” he told ABC10.
Rubio’s filed for Chapter 11 bankruptcy protection in 2020, citing the impact of the pandemic. The company has closed stores in Florida and Colorado, according to the Los Angeles Times.
The minimum wage could go up even further. The $20 an hour minimum wage only applies to fast food restaurants with more than 60 locations nationwide. Otherwise, the minimum wage in California is currently $16.
On the ballot this fall, voters will decide whether to raise the state’s minimum wage to $18 an hour by 2025 for businesses with 25 or more employees and by 2026 for small businesses.
Rubio’s announces it will close 48 California stores due to rising state business costs
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